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Volume 58, Number 2, Spring 2017

WTO Trade and Environment Jurisprudence:Avoiding Environmental Catastrophe

Joel P. Trachtman

Free trade and national environmental protection measures are not always consistent. Yet,the parties to the WTO decided, and committed in WTO law, that even where a nationalenvironmental protection measure would otherwise violate a free trade rule of the GATT orGATS, the national environmental measure would generally be permitted, subject to certainconditions. It is important to recognize that member states of the WTO were serious bothabout allowing great flexibility for national environmental measures, and about establishingsome conditions so that this flexibility is not abused. It is also important to recognize that, byestablishing the WTO dispute settlement system, member states decided that WTO Panels,and the Appellate Body on appeal, would generally decide disputes about the scope of thisflexibility.

In this article, I show how the WTO Appellate Body has, in several important instances,sought to avoid carrying out this responsibility, and has limited the scope of its analysis suchthat it cannot carry out this responsibility effectively. Sometimes, the Appellate Body has doneso by exalting textualism over the broader context, object, and purpose of provisions of WTOlaw, and sometimes the Appellate Body has done so by the opposite of textualism: by ac-cepting limits on the analysis carried out by Panels where those limits are not expressed in theWTO treaty, and are inconsistent with the plain terms of that treaty. This type of selectivetextualism is doctrinally incoherent, and can only be explained as a method of cloaking theexercise of discretion by judges of the Appellate Body. While this discretionary authority isbest understood as granted by the WTO treaty, and so is not an abuse of judicial authority, theattempt to cloak its exercise in textualism results in incoherence, and a failure to articulate andlegitimize the true bases for a decision.

The issues addressed in this article are critical for the future of the WTO, as well as forexisting and proposed preferential trade agreements, such as the Trans-Pacific Partnership(which the United States has now abandoned) and the Transatlantic Trade and InvestmentPartnership (which, at the time of this writing, was threatened with abandonment by theUnited States). Indeed, the ability to effectively implement international measures addressingclimate change depends on a coherent and appropriate jurisprudence of trade and environmentin these agreements.

I. Introduction

WTO law has as its focus the promotion of a liberal trading system. Theprimary purpose of WTO law is not to promote environmental protection.Even so, the first preamble of the Marrakesh Agreement Establishing theWorld Trade Organization refers to the need for compromise between thegoal of growth, on the one hand, and the need to protect the environment,


274 Harvard International Law Journal / Vol. 58

on the other hand.1 This is critical context for interpreting the WTO Agree-ment, and it suggests why many of the provisions of WTO law entail com-plex tradeoffs between trade liberalization obligations and regulatory spacefor environmental protection.

If negotiators were beginning with a clean sheet, they would be well-advised to write this compromise differently, and more generally, to applyconsistently across the various agreements and commitments. The basicthrust of the negotiators’ agreement would be to exempt from restrictionunder trade law all environmental protection measures that are not dispro-portionate—that are not excessively costly in relation to the benefits theyoffer.2 Costs would be determined in terms of lost global welfare (includingbut not limited to both the importing country and the exporting country),and these costs would be compared with the environmental benefits. Theymight in addition include a prohibition of discrimination, but as shownbelow, in this area a prohibition of de facto discrimination would be congru-ent with a requirement of proportionality, and there might be circumstancesin which even de jure discrimination could be proportionate.

In some ways, the WTO sub-agreements relating to Technical Barriers toTrade (TBT)3 and to Sanitary and Phytosanitary Measures (SPS)4 can be in-terpreted to include a requirement of proportionality along the lines I havedescribed. However, most often, the requirement of proportionality is ap-plied alongside other restrictions. In connection with the other applicabledisciplines relating to non-discrimination, the Appellate Body has foundgreater restrictions than in the proportionality discipline, denying that disci-pline effet utile. The Appellate Body has done so by, at times, according ahypertextualist respect to differences in language within and between theWTO sub-agreements, and by developing strained interpretations that haveno basis in treaty text, reading words into the treaty that are not there.

The good news is that, thus far, presumably because of the good instinctsof the Appellate Body judges and the influence of the WTO community, wehave avoided a major decision that is insensitive to environmental protec-tion. But the relative incoherence of the existing system places undue reli-ance on good instincts, rather than an articulated jurisprudence, andtherefore increases the risk of a virtual environmental disaster in Geneva. Asa matter of jurisprudential risk management, some rectification is in order.Indeed, as explained below, the 2015 Appellate Body decision finding the

1. Marrakesh Agreement Establishing the World Trade Organization, preamble, Apr. 15, 1994, 1867U.N.T.S. 154.

2. See Joel P. Trachtman, Trade . . . Problems, Cost-Benefit Analysis, and Subsidiarity, 9 Eur. J. Int’l L.32, 38 (1997).

3. See Agreement on Technical Barriers to Trade, Apr. 15, 1994, 1868 U.N.T.S. 120.4. See Agreement on the Application of Sanitary and Phytosanitary Measures, Apr. 15, 1994, 1867

U.N.T.S. 493.


2017 / WTO Trade and Environment Jurisprudence 275

U.S. regime for dolphin-safe tuna labeling illegal under WTO law is a har-binger of future trouble.5

This article describes the evolution of the WTO trade and environmentjurisprudence, focusing on the General Agreement on Tariffs and Trade(GATT)6 and TBT Agreements as the agreements principally concernedwith this tradeoff, although recognizing that other WTO agreements, suchas the SPS and Subsidies and Countervailing Measures (SCM)7 Agreements,as well as the General Agreement on Trade in Services (GATS),8 may play animportant role in the relationship between trade liberalization and environ-mental protection.

Part II examines the evolution of WTO national treatment anti-discrimi-nation jurisprudence, and the Appellate Body’s unfortunate, and perhapsunintentional, refusal to respect national regulatory distinctions as legiti-mate and non-discriminatory bases for differential treatment. Part III ex-plains the similar dangers that can arise in connection with the most-favorednation anti-discrimination rule. Part IV describes the limitations of the ex-ception-granting clauses of Article XX of GATT. Part V explains the lim-ited coherence between multilateral environmental agreements (MEAs) andWTO law. In Part VI, I describe the limits of textualism in the context ofWTO trade and environment adjudication. Part VII concludes.

This examination will show that WTO law relating to trade and environ-ment is not internally coherent. Its anti-discrimination prohibitions seem toapply to invalidate good faith regulatory action. In connection with its re-lated environmental exceptions, the Appellate Body has failed to follow itsown doctrine which calls for authentic balancing of trade and environmentalvalues. It might be said that these two incoherencies—one invalidating en-vironmental regulation in an overbroad manner, and the second providing aloose rationale for exempting violations—may balance one another out.However, this contraption stimulates little respect for the rule of law and forthe Appellate Body’s jurisprudence, and it is an unreliable mechanism bywhich to mediate between two of the great social goals of our time: improv-ing welfare through trade and through protecting the environment.

5. It is suggested below that recent Appellate Body decisions in the Tuna II cases display a troublingdegree of insensitivity to national autonomy in environmental and consumer protection policy. See Appel-late Body Report, United States—Measures Concerning the Importation, Marketing and Sale of Tuna and TunaProducts, Recourse to Article 21.5 of the DSU by Mexico, WTO Doc. WT/DS381/AB/RW (adopted Dec.3, 2015) [hereinafter Tuna II 21.5].

6. General Agreement on Tariffs and Trade, Apr. 15, 1994, 1867 U.N.T.S. 187 [hereinafter GATT1994 or GATT]; General Agreement on Tariffs and Trade, Oct. 30, 1947, 55 U.N.T.S. 194 [hereinafterGATT 1947].

7. Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, 1869 U.N.T.S. 14.8. General Agreement on Trade in Services, Apr. 15, 1994, 1869 U.N.T.S. 183, 33 I.L.M. 1167.



II. GATT Article III

Imported products can affect the environment in two ways. First, theproduct itself may cause environmental degradation. For example, Brazil’srestrictions on imports of retreaded tires, challenged by the European Unionin Brazil—Tyres, were motivated by the environmental problems associatedwith disposal of used tires.9 These problems are consumption externalitiesinsofar as the consumer of the tires does not sufficiently take into accountthe environmental problems that arise from his consumption decision. Sec-ond, and more commonly, domestic restrictions on imports are motivated byconcerns regarding production externalities. Examples include concernsabout the impact on dolphins resulting from the way imported tuna is har-vested, or about the carbon released in the production of imported products.

The terms of the GATT 1947, as reiterated in the GATT 1994, do notcontain any affirmative requirement of proportionality (parts of Article XXhave been understood to provide a defense for measures that are proportion-ate, but these provisions are only relevant after a violation is found).10

GATT 1994 includes prohibitions of discrimination, in both the most-fa-vored nation (MFN) sense under Article I11 and in the national treatmentsense under Article III. Most trade and environment cases have arisen underArticle III, although they certainly can raise issues of Article I MFN dis-crimination as well. The terms of Article III:2 of GATT, relating to internaltaxes, are somewhat different from, and more complex than, those of ArticleIII:4. For simplicity’s sake, then, this Article will focus on Article III:4—onenvironmental regulation as opposed to environmentally-motivated taxa-tion. While Pigouvian taxes12 can be applied to imported products in orderto address environmental externalities, most environmental cases at theWTO have arisen from product regulation, addressed under Article III:4 ofGATT.

Article III of GATT generally examines national treatment-type discrimi-nation by engaging in a product comparison—“like products” under ArticleIII:4—and a treatment comparison—“less favourable treatment” under Ar-ticle III:4. Defining discrimination in legal terms is extremely difficult. Al-though many may feel that they know discrimination when they see it, nolegal system has been able to produce an easily applied definition. The rea-

9. See Appellate Body Report, Brazil—Measures Affecting Imports of Retreaded Tyres, WTO Doc. WT/DS332/AB/R (adopted Dec. 3, 2007) [hereinafter Brazil—Tyres]. For an economic analysis, see Chad P.Bown & Joel P. Trachtman, Brazil—Measures Affecting Imports of Retreaded Tyres: A Balancing Act, 8World Trade Rev. 85, 124 (2009).

10. Many environmental cases have been defended on the basis of Article XX(b), which protectscertain measures “necessary” to protect human, animal or plant life or health. This necessity test has alsobeen applied by the WTO Appellate Body to a proportionality test, as discussed below.

11. MFN requires that imported goods from country A be treated as well as imported goods from allother countries.

12. Pigouvian taxes are taxes that impose the costs of externalities on the producer or consumer.



son is that every determination of de facto discrimination is implicitly, andnecessarily, a determination of whether a regulatory distinction is valid orinvalid: those charged with determining discrimination cannot escape judg-ment of the validity of a regulatory distinction.

However, within the WTO’s existing Article III jurisprudence, the Ap-pellate Body has abdicated this function. The Appellate Body does not en-gage in this type of judging—it declines to determine whether regulatorydistinctions are valid or invalid under Article III:4. While the AppellateBody does engage in this type of judging under Article 2.1 of the TBTAgreement, it does so in a highly formalistic mode, simply determiningwhether the regulatory categories are fully rational, without determiningwhether the irrationality it identifies has an effect on market access.

Although the Appellate Body nevertheless has a system for deciding caseswhere domestic regulation is challenged, this system is set up in such a waythat some regulatory categories that lay people would find perfectly reasona-ble could be found invalid. This does not mean that they will be foundinvalid as de facto discrimination, but it does mean that in order to avoidfinding reasonable regulation invalid, the Appellate Body judges will berequired to exercise discretion in a way that is not included in their ostensi-ble method. Thus, the normative question raised by this article is whether itis better for judges to retain this hidden discretion, or to make explicit thebases on which they exercise judgment. The following subsections set forthhow this jurisprudence developed, why the judging function is so impor-tant, and how the latter could be reclaimed.

A. Like products

Of course, determinations of regulatory discrimination are always basedon a comparison of two subjects of regulation, which must be sufficientlycomparable to merit equal treatment. So, it is not understood to be discrimi-nation to require automobiles to be equipped with air bags, while not re-quiring bicycles to be so equipped. In GATT Article III:4, this is thequestion of “like products.”

The Appellate Body has adopted the position that the determination ofwhether two products are “like” is fundamentally a determination aboutwhether the products are sufficiently in competition with one another.13 Atone level, this is a perfectly understandable approach, and it definitely mustbe at least a threshold part of the determination. But whenever we take atreaty term such as “like products,” and define it using other terms, it isdifficult to avoid expanding or contracting its meaning. In this context, theAppellate Body has diminished “like products” from its ordinary meaningin an important way, because it has excluded national governmental deter-

13. Appellate Body Report, European Communities—Measures Affecting Asbestos and Asbestos-ContainingProducts, ¶ 99, WTO Doc. WT/DS135/AB/R (adopted Apr. 5, 2001) [hereinafter EC—Asbestos].



minations of regulatory categories from consideration in connection with thedetermination of likeness. The result is that when two products are suffi-ciently in competition, they are determined to be like products even if theydiffer in exactly the dimension that gives rise to the regulatory concern.

Thus, if gasoline-powered automobiles are required to be equipped withcatalytic converters, while electric-only automobiles are not required to beso equipped, it is theoretically possible that this distinction could be foundto constitute discrimination against imported gasoline-powered automo-biles, only provided that gasoline and electric automobiles are sufficiently incompetition with one another. This is absurd because the regulatory concernfor emissions is the basis for distinction, and there is no protectionist intent.

In effect, under the Appellate Body’s current approach, the question ofwhether products have a sufficient competitive relationship is a market-based determination, reflecting consumer behavior. But consumers are, bydefinition, insufficiently sensitive to both consumption externalities andproduction externalities, and consumers are also victims of informationasymmetries compared to producers.14 They fail to take account of some ofthe effects on them (information asymmetries) and fail to take account of theeffects on others (externalities). In economic theory, these are the reasons forregulation. So, the bases for regulatory distinctions are systematically ex-cluded from the determination of “like products.” This approach is essen-tially disrespectful of the sovereign right to regulate by distinguishingcategories of products, regardless of consumer perceptions.

It would seem absurd to imagine that the authors of Article III of GATTintended that all regulation that was not congruent with consumer percep-tions would violate Article III, and require justification under Article XX.To consign any regulation that is not congruent with consumer percep-tions—that treats products differently for reasons that do not affect theircompetitive positions—to illegality under Article III is clearly overbroad. Itdelegitimizes the most important category of regulatory intervention—in-tervention where, by definition, the market does not sufficiently distinguishbetween products on the basis of the relevant regulatory concerns.

True determination of the discriminatory, as opposed to bona fide, natureof regulatory categories requires more nuanced analysis. Indeed, examining aline of trade cases, Robert Hudec observed that no matter what judges saythey are doing in discrimination cases, they will inevitably consider “aimand effects.”15 By this he meant that it is impossible to determine de factodiscrimination in the trade context without some assessment of (i) whether

14. See Frieder Roessler, Robert Schuman Center for Advanced Studies Policy Paper,The Scope of Regulatory Autonomy of WTO Members under Article III:4 of the GATT: ACritical Analysis of the Jurisprudence of the WTO Appellate Body, 3 (2015).

15. Robert E. Hudec, GATT/WTO Constraints on National Regulation: Requiem for an “Aim and Effects”Test, 32 Int’l L. 619, 620 (1998). See also Amelia Porges & Joel P. Trachtman, Robert Hudec and DomesticRegulation: The Resurrection of Aim and Effects, 37 J. World Trade 783, 783–799 (2003).



the aim of the regulation is protectionist, or, alternatively, is motivated byan acceptable regulatory purpose, and (ii) whether the restrictions fall dis-proportionately on imported products. Hudec’s work suggested that thesefactors be explicitly considered in connection with the “like products” de-termination, but they could also be considered under the “less favourabletreatment” prong.16 His goal was to make explicit the substantive concernsthat actually form the basis for decisions.

However, the Appellate Body rejected “aim and effects” early, in its Ja-pan—Alcoholic Beverages decision,17 determining that the focus of the likeproducts determination is on the Border Tax Adjustment18 factors—physi-cal characteristics, end-uses, consumer perception and tariff classification—and that no proof of trade effects is required.

While the Appellate Body in Japan—Alcoholic Beverages pointed out thatthe purpose of Article III is to limit protectionism and to ensure equal com-petitive opportunities, it did not at this point hold that the like productsdetermination is focused solely on competitive relationships. In the 2001EC—Asbestos case, the Appellate Body determined that likeness under Arti-cle III:4 is “fundamentally, a determination about the nature and extent of acompetitive relationship between and among products.”19 It did so on thebasis of a fundamental logical error. Here is its logic:

As products that are in a competitive relationship in the market-place could be affected through treatment of imports “less favour-able” than the treatment accorded to domestic products, it followsthat the word “like” in Article III:4 is to be interpreted to applyto products that are in such a competitive relationship.20

This is a non-sequitur. Of course the Appellate Body is correct that acompetitive relationship is necessary for a determination of like products, butan examination of this logic reveals that the second clause does not followfrom the first: a competitive relationship is necessary, but not sufficient, todetermine likeness. This fundamental logical error has informed, and dis-torted, much of subsequent jurisprudence. Furthermore, this understandingof likeness fails to reflect the object, purpose, and context provided by Arti-cle III:1, which is permissive of domestic regulation so long as it is notapplied “so as to afford protection.” The Appellate Body’s interpretative

16. Id.17. Appellate Body Report, Japan—Taxes on Alcoholic Beverages, 17-22, WTO Doc. WT/DS8/AB/R

(adopted Nov. 1, 1996).18. Report of the Working Party on Border Tax Adjustments, L/3464 (Dec. 2, 1970), GATT BISD (18th

Supp.), at 97 (1971).19. However, the concurring member of the Appellate Body expressed “substantial doubt” as to the

“necessity or appropriateness” of adopting a “ ‘fundamentally’ economic interpretation” of “like prod-ucts” under Article III:4. Appellate Body Report, EC—Asbestos, ¶ 154.

20. Appellate Body Report, EC—Asbestos, ¶ 99.



methodology purports to follow Article 31 of the Vienna Convention on theLaw of Treaties (VCLT or Vienna Convention), which states that “[a] treaty

Shall be interpreted in good faith in accordance with the ordinarymeaning to be given to the terms of the treaty in their contextand in the light of its object and purpose.”21

However, it often de-emphasizes object and purpose.Perhaps more importantly, the Appellate Body’s position regarding like-

ness is inconsistent with the ordinary meaning of “like”—the AppellateBody has read into “like” a limiting word that is not included in the text:“competitive.” The ordinary meaning of “like” would, in natural parlance,allow broader consideration of factors salient to regulatory purposes—factorsthat determine the applicability or inapplicability of regulation. Even so, theAppellate Body in EC—Asbestos found that health risks may be consideredin connection with a determination of likeness but only insofar as the healthrisks affect competitiveness.22 However, this approach fails to take into ac-count the broadest category of health risks that form the basis for regulation:circumstances in which consumers fail to fully appreciate the risk.

Thus, under existing jurisprudence, a bona fide regulatory distinctionthat does not otherwise affect competitiveness is not a distinction that af-fects the determination of likeness. Note the implications: where such ameasure also has less favorable effects on the class of imported products, eventhough those effects are purely an artifact of a legitimate regulatory distinc-tion, it violates Article III:4.

Since the Appellate Body’s 2011 decision in Philippines—Distilled Spir-its,23 it has now extended the competition-focused approach to determininglike products to all parts of Article III. The competition-based approachseems plausible in connection with evaluation of non-Pigouvian revenue-raising taxes, such as those applied in these alcoholic beverage cases, becausein that context, there is often no plausible regulatory policy rationale for thedistinctions.

How can it be that practically all domestic regulation of products is atrisk of being found inconsistent with the GATT anti-discrimination obliga-tions? The Appellate Body has argued that Article XX of GATT is suffi-cient to provide adequate scope for national regulatory autonomy, despite its

21. Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331 [hereinafter VCLTor Vienna Convention].

22. Appellate Body Report, Japan—Taxes on Alcoholic Beverages, ¶¶ 113, 115, WTO Doc. WT/DS8/AB/R (adopted Nov. 1, 1996).

23. Appellate Body Reports, Philippines—Taxes on Distilled Spirits, WTO Doc. WT/DS396/AB/R /WT/DS403/AB/R (adopted Jan. 20, 2012).



strict reading of Article III.24 Part IV below explains why Article XX maybe insufficient in an important range of cases.

B. Product-process and the III-XI division

The discussion above focuses on national environmental regulation con-cerned with consumption externalities. But there are also important nationalenvironmental regulations, and proposals for international environmentalregulation, that address production externalities. In connection with im-ported products, these products might be taxed or prohibited entry, basedon the manner in which they are produced. These types of taxes or prohibi-tions are understood as regulation of process or production methods (PPMs).The classic examples of this type of restriction are evident in the U.S.—TunaI25 and U.S.—Shrimp26 cases, where imports are barred due to the way theproduct is harvested. In the future, a wide variety of issues, including na-tional measures relating to carbon content of imported products, may raisesimilar issues.

The legal issue relating to PPMs is whether GATT/WTO law authorizesWTO members to maintain regulatory distinctions based on PPMs of im-ported products. In particular, the debate has focused on whether productsthat comply with specified PPM criteria and those that do not are “like” forthe purpose of the national treatment obligations of Article III.27 The impli-cation of the competition-based approach to “likeness” is that, unless con-sumers distinguish between products on the basis of the PPM, differences inPPMs are unlikely to render products “un-like.” For example, in the case ofcarbon regulation, unless consumers distinguish between products on thebasis of the amount of carbon used in their manufacture, high carbon-inten-sity and low carbon-intensity products would be treated as like products.

The pre-WTO Tuna Panel took the following approach. Under a GATTArticle III analysis, regulation of PPMs, which by their nature are carriedout in the exporting state, are not “subject to” Article III because, accordingto the Panel’s interpretation, Article III deals only with regulation of prod-ucts, as opposed to regulation of the production process. The consequence ofnot being subject to Article III is strict scrutiny under Article XI, based onan interpretation of the ad note to Article III to the effect that if this type ofmeasure is not subject to Article III it is subject to Article XI. These PPM-based national measures fail the strict scrutiny test of Article XI because

24. Appellate Body Reports, European Communities—Measures Prohibiting the Importation and Marketingof Seal Products, ¶ 5.128, WTO Doc. WT/DS400/AB/R / WT/DS401/AB/R (adopted June 18, 2014)[hereinafter EC—Seal Products].

25. Report of the Panel, United States—Restrictions on Imports of Tuna, DS21/R, (Sept. 3, 1991), GATTBISD (39th Supp.), at 155 (unadopted) [hereinafter U.S.—Tuna I].

26. Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products,WTO Doc. WT/DS58/AB/R (adopted Nov. 6, 1998) [hereinafter U.S.—Shrimp].

27. See, e.g., Steve Charnovitz, The Law of Environmental “PPMs” in the WTO: Debunking the Myth ofIllegality, 27 Yale J. Int’l L. 59 (2002).



they operate to restrict market entry and are therefore illegal quantitativerestrictions, unless an exception applies under Article XX. In the WTOperiod, the U.S.—Shrimp dispute presented similar facts and was analyzed atthe Panel level in a similar manner, but the Article XI violation found bythe Panel was not challenged by the United States and therefore the Appel-late Body did not have an opportunity to consider whether PPMs should beanalyzed under Article III.

The advantage of this approach to PPMs is that the product-process dis-tinction serves as a clear and simple rule on territorial–extraterritorial regu-latory distinctions in the main GATT market access rules. Production processesoccur in the exporting state. Policies effected within the territory of theexporting state are not under the jurisdiction of the importing state, evenusing the lever of trade restrictions. Products coming into the territory of theimporting state are. This way, a certain territorial vision of the regulatoryautonomy of both the importing and exporting states would be maintained.Physical characteristics of products can be regulated by the importing statebut not non-product related policies. It is worth noting here, however, that,as discussed in Part V, some extra-territorial policy considerations may beavailable under the exceptional provisions of Article XX.28

However, if Article III does not cover PPM-type regulation, then, underthe ad note to Article III, PPM-based regulation will likely be viewed as aquantitative restriction prohibited by Article XI, unless excepted under Ar-ticle XX. This protects the exporting state’s regulatory autonomy, but notthat of the importing state.

The fact that under the TBT Agreement the Appellate Body has implic-itly found PPMs to be an inherent part of technical regulations raises ques-tions about how this interpretation could influence future jurisprudence onthe application of GATT Article III to PPMs.29 In the 2012 Appellate Bodydecision on Tuna II,30 applying Article 2.1 of the TBT Agreement, the Ap-pellate Body accepted that, while the United States had not appealed thePanel’s determination of likeness, it is permissible in theory under the Arti-cle 2.1 national treatment obligation to differentiate among products on thebasis of a PPM: “Article 2.1 should not be read . . . to mean that anydistinctions, in particular ones that are based exclusively on particular prod-uct characteristics or on particular processes and production methods, wouldper se constitute ‘less favourable treatment’ within the meaning of Article2.1.”31 This decision was made in the context of the TBT Agreement, which

28. See Lorand Bartels, Article XX of GATT and the Rules of Public International Law on ExtraterritorialJurisdiction – The Case of Trade Measures for the Protection of Human Rights, 36 J. World Trade 353 (2002).

29. See Appellate Body Report, United States—Measures Affecting the Production and Sale of Clove Ciga-rettes, ¶ 169, WTO Doc. WT/DS406/AB/R (adopted Apr. 24, 2012) [hereinafter U.S.—Clove Cigarettes].

30. See Appellate Body Report, United States—Measures Concerning the Importation, Marketing and Sale ofTuna and Tuna Products, WTO Doc. WT/DS381/AB/R (adopted June 13, 2012) [hereinafter U.S.—TunaII].

31. Id. ¶ 211.



specifically includes certain PPMs within its scope of coverage, so it does notnecessarily suggest the outcome of a GATT Article III case.

Another view is that Article III covers all internal regulations, even whenbased on PPM or on extra-territorial considerations not reflected in thephysical characteristics of the products as such. GATT is concerned withdisciplines on products. According to this view, Article III applies to PPMregulations but the operationalization of Article III will generally lead to theconclusion that PPM and non-PPM based products are like products32 basedon a competition and product-focused definition of likeness. The implica-tion of the competition-based approach to likeness is that unless consumersdistinguish between products on the basis of the amount of carbon utilizedin producing the product, varying carbon intensity is unlikely to render prod-ucts “un-like.”

Furthermore, in the Canada—Feed-in Tariff Program case, the AppellateBody stated that “what constitutes a competitive relationship between prod-ucts may require consideration of inputs and processes of production used toproduce the product.”33 It is not clear how far the Appellate Body intendedthis statement to apply. If Article III does cover PPM-type internal taxes,the Appellate Body’s application of a competition-based test suggests that inmost cases, different PPMs would be insufficient to make products “un-like.” For example, carbon-intensive imported products will be found to be“like” low-carbon domestic products. The test under Article III would thenprohibit treating like products differently on the basis of PPM considera-tions. As discussed in more detail below, Article XX could, however, beinvoked to justify the use of such a PPM-based regulatory distinction, as wasrecognized in U.S.—Shrimp.

To summarize, if Article III does not cover PPM-type regulations, then,under the ad note to Article III, PPM regulations will be viewed as quantita-tive restrictions (a ban of products not respecting the PPM prescriptions)subject to, and prohibited by, Article XI. If Article III covers PPM typeregulations, the Appellate Body’s application of a competition-based test inEC—Asbestos suggests that in most cases, different PPMs would be insuffi-cient to make products “un-like.” The test under Article III would thenprohibit treating like products differently on the basis of PPM considera-tions. In this sense the product/process distinction may often restrict the

32. It is, however, conceivable that faced with a PPM distinction referring to human rights violationsor other very serious concerns, consumer preferences may be so strong as to reverse the prima facieevidence that goods that are physically similar are considered like, pursuant to the Appellate Body state-ment in paragraph 118 of its EC—Asbestos Report. This type of situation may also constitute a justifica-tion under Article XX. The point is that if consumer preferences are strong enough to make productsunlike, there is little need for regulation. This argument holds if the persons protected by the regulationare the consumers, rather than third parties. See Appellate Body Report, EC—Asbestos, ¶ 118.

33. Appellate Body Reports, Canada—Certain Measures Affecting the Renewable Energy Generation Sector /Canada—Measures Relating to the Feed-In Tariff Program, ¶ 5.63, WTO Doc. WT/DS426/AB/R (adoptedMay 24, 2013).



extra-territorial application of national measures. Having said that, such Ar-ticle III-inconsistent PPM regulation may benefit from the policy justifica-tions set forth in Article XX.

C. Less favorable treatment

In order to find a violation of Article III:4, like products must be found tobe treated “less favourably.” In paragraph 100 of its EC—Asbestos decision,the Appellate Body seemed, delphically, to leave open the possibility thatthis second major prong (after “like products”) of the Article III:4 test—lessfavorable treatment—would not necessarily be satisfied in cases where statesmade legitimate regulatory distinctions between (competitively) like prod-ucts: “however, a Member may draw distinctions between products whichhave been found to be ‘like’, without, for this reason alone, according to thegroup of “like” imported products “less favourable treatment” than thataccorded to the group of ‘like’ domestic products.”34

This possibility has been foreclosed in the 2014 decision in Seal Products,where the Appellate Body held for the first time that “less favourable treat-ment” under Article III:4 would be determined purely by reference to ef-fects on competition.35

This holding, combined with the competition-based determination oflike products, leaves no room for respect for national regulatory distinctionswithin Article III:4 of GATT, unless they happen to be congruent withcompetitive dynamics.36 This outcome is surprising—how is it that a prohi-bition of discrimination has evolved into a prohibition of any regulation thathappens to have adverse effects on competing imported products? A likelyexplanation is that the Appellate Body has been excessively modest in itswillingness to exercise judgment, seeking a mechanical rule for determiningboth “like products” and “less favourable treatment.”

So, at this juncture, it appears that the Appellate Body’s Article III juris-prudence is hostile to legitimate regulatory distinctions. It is entirely possi-ble that imported products would be in very close competition, but wouldresult in substantial consumption externalities, or even production externali-ties, not caused by the like domestic products, making it perfectly rational,and desirable, to impose regulatory distinctions. Yet, under the AppellateBody’s Article III jurisprudence, these distinctions would be illegal, subjectonly to Article XX exceptions, as discussed below.

Thus the current Article III discrimination jurisprudence would often re-sult in a finding of violation, and legitimate regulation could then only bepermitted if an Article XX exception is available. Since the advent of theWTO, scholars and policy makers have wondered about the fact that the

34. Appellate Body Report, EC—Asbestos, ¶ 100.35. Appellate Body Report, EC—Seal Products, ¶ 5.101.36. See Appellate Body Report, U.S.—Clove Cigarettes, ¶¶ 118, 138.



TBT Agreement contains MFN and national treatment obligations, as wellas other obligations, but lacks a set of general exceptions such as that foundin Article XX of GATT. The Article III national treatment jurisprudencedescribed above made this concern more pressing. In U.S.—Clove Cigarettes,the Appellate Body has interpreted “less favourable treatment” within thecontext of Article 2.1 of the TBT Agreement, to include an assessment ofnon-protectionist regulatory justification.37 This is a departure from its un-derstanding of the same language in Article III of GATT.

While some have assumed that the failure to include a general exceptionsclause in the TBT Agreement was unintentional, Frieder Roessler suggeststhat “the drafters of the TBT Agreement . . . assumed that technical regula-tions that distinguish products with different characteristics for legitimatepolicy reasons would not be found to violate that Agreement’s nationaltreatment requirement.”38 They assumed that a national treatment obliga-tion would not be violated by regulation motivated by non-protectionistconcerns. Thus, no general exceptions clause was necessary. Note that thecompetition-based approach to “like products” described above, combinedwith the competition-based approach to “less favourable treatment,” if ex-tended to Article 2.1 of the TBT Agreement, would be inconsistent withthe assumption Roessler argues was made by the drafters of the TBTAgreement.

When this issue came up in the U.S.—Clove Cigarettes case, the AppellateBody engaged in a creative interpretation to find that “the context and ob-ject and purpose of the TBT Agreement weigh in favour of interpreting the‘treatment no less favourable’ requirement of Article 2.1 as not prohibitingdetrimental impact on imports that stems exclusively from a legitimate regulatorydistinction.” 39

So, the Appellate Body “solved” the problem of its narrow approach to“like products” by interpreting “less favourable treatment” in two differentways within the WTO treaty.

Indeed, in addition to the relevant recitals and Article 2.2 of the TBTAgreement, the Appellate Body referred to the exceptions in Article XX ofGATT as part of the context for interpretation of the TBT Agreement. Thisis starkly inconsistent with the normal effet utile approach to interpretationadopted by the Appellate Body, which insists on giving meaning to differ-ences in treaty language: an effet utile approach would ordinarily treat thesame words in the same treaty the same way.

To be clear, in U.S.—Clove Cigarettes, the Appellate Body found that adetermination of discrimination in the TBT context requires assessment ofthe aim of the regulatory measure. The Appellate Body determined that thedetrimental impact must stem exclusively from a legitimate regulatory dis-

37. Appellate Body Report, U.S.—Clove Cigarettes, ¶ 182.38. Roessler, supra note 14, at 2–3. R39. Appellate Body Report, U.S.—Clove Cigarettes, ¶¶ 180–82 (emphasis added).



tinction, in a context where we often see mixed motives and mixed effects.Indeed, perhaps a more appropriate phrase would be “necessary to fulfill alegitimate regulatory objective,” borrowed from Article 2.2, in order to al-low for detrimental impacts that necessarily stem from a regulatory distinc-tion, but do not stem exclusively from a regulatory distinction. But if theAppellate Body had chosen that formulation, then it would have been moreobvious that Article 2.1 itself was robbed of effet utile, subsumed by Article2.2, which already provides that technical regulations “shall not be moretrade restrictive than necessary to fulfil a legitimate objective.”

The adherence to the principle of effet utile in this case seems to obstructthe path to a reasonable formulation. But note that if a reasonable formula-tion, along the lines of “necessary to fulfil a legitimate regulatory objec-tive,” had been selected, then we could observe that the ineluctablesubstantive drive toward consideration of “aim” or regulatory purpose in defacto discrimination cases causes a rule against discrimination to morph intoa proportionality test. So, in effect, we have learned by jurisprudential expe-rience that the line between “discrimination” and proportionality is not asdistinct as might have been assumed.40

So, in the context of Article 2.1 of the TBT Agreement, the AppellateBody determined that some assessment of the aim of a national measure isappropriate in determining discrimination. Is a similar assessment requiredunder the national treatment analysis in GATT?

In Seal Products, the EU argued that the “stems exclusively from a legiti-mate regulatory distinction” standard developed in U.S.—Clove Cigarettesshould also be applied to interpretation of the similar “less favourable treat-ment” language of Article III:4 of GATT.41 That is, a measure should notbe found to impose less favorable treatment within the meaning of ArticleIII:4 if its detrimental impact stems exclusively from a legitimate regulatorydistinction. The EU also argued that the MFN obligation in Article I:1should be read the same way, despite the fact that the term “less favourabletreatment” is not included there. The EU simply sought consistent interpre-tation of “less favourable treatment,” and consistent treatment across sub-agreements: if discrimination requires assessment of the aim of the regula-tory measure under the TBT Agreement, discrimination should be deter-mined similarly under GATT. This approach to interpretation not only

40. As might have been predicted, the Appellate Body has already begun to move in this directionunder the TBT Agreement. In Tuna II, in the context of its TBT Agreement Article 2.1 discriminationanalysis, the Appellate Body addressed the question of whether the U.S. tuna labeling regime was suffi-ciently “calibrated” to different conditions in different areas, asking “whether the United States hasdemonstrated that this difference in labelling conditions is a legitimate regulatory distinction, and hencewhether the detrimental impact of the measure stems exclusively from such a distinction rather thanreflecting discrimination.” Appellate Body Report, U.S.—Tuna II, ¶ 284.

41. Panel Reports, European Communities—Measures Prohibiting the Importation and Marketing of SealProducts, WTO Doc. WT/DS400/R / WT/DS401/R / and Add.1, ¶¶ 7.581-7.586, adopted 18 June2014, as modified by Appellate Body Reports WT/DS400/AB/R / WT/DS401/AB/R.



accords effet utile to the use of similar language in two parts of the WTOtreaty, but is also respectful of context and object and purpose, and promotessubstantive consistency in the face of suboptimal drafting.

The Appellate Body rejected these arguments, extending the line ofWTO jurisprudence described above to the effect that discrimination cases,other than under Article 2.1 of the TBT Agreement, are to be determinedbased purely on competitive factors, subject to the availability of exceptionsunder Article XX.42 First, imported and domestic products (or under MFNimported products from different countries) would be determined to be“like” or “directly competitive or substitutable” based purely on competi-tive factors.

Furthermore, in Seal Products, the Appellate Body held for the first timethat “less favourable treatment” under Article III:4 would be determinedpurely by reference to the effect on competition.43 The evocative language ofthe Appellate Body’s 2001 report in the EC—Asbestos case, suggesting inparagraph 100 that a broader analysis is possible, was interpreted into irrele-vance by the Appellate Body in the Seal Products decision.

Note the implications of the Appellate Body’s decision: regulatory pur-poses are now irrelevant to determinations of discrimination under theprohibitions of GATT (although they are relevant to the exceptions underArticle XX), but not under the TBT Agreement.44 The EU made the argu-ment that this holding would leave a narrower right to regulate in theGATT than that which was found to exist in Article 2.1 of the TBT Agree-ment pursuant to the Appellate Body’s U.S.—Clove Cigarettes decision torespect “legitimate regulatory distinctions” under that provision—whichwould be inconsistent with what most people think was the negotiators’ anddrafters’ intent. After all, the GATT only has Article XX, which has a lim-ited list of permissible regulatory purposes, and for which the respondentlargely bears the burden of proof. In response to the EU’s assertion of thispoint, the Appellate Body responded that the EU was unable to articulateany regulatory purpose not listed in Article XX of GATT.45 However, it iseasy to see in connection with the Seal Products case that the protection ofindigenous people is not listed in Article XX, nor is consumer protectionincluded. Furthermore, as Roessler has pointed out, the EU did provide con-crete examples to illustrate its concerns.46

42. See Appellate Body Report, EC—Seal Products.43. Id. ¶ 5.101.44. The Appellate Body asserts that the same things that form the basis for a regulatory distinction

could also form the basis for a difference in competitive situation, but this does not mean that regulatorydistinctions have any independent role. Indeed, as noted above, the reason for regulation is often that themarketplace fails sufficiently to make relevant distinctions.

45. See Appellate Body Report, Seal Products, ¶ 5.128.46. See Roessler, supra note 14, at 5 n.17 (citing Other Submission of the European Commission, R

European Union in European Communities—Measures Prohibiting the Importation and Marketing of Seal Products,¶ 307 n.17, WTO Doc. WT/DS400 (Jan. 29, 2014)).



Seal Products represents what one may only hope will be a turning point inwhich the Appellate Body will apply Article XX liberally in order to ensurethat states have sufficient regulatory autonomy, now that it has removedconsideration of regulatory purpose from Article III discussion. Perhaps also,the Appellate Body will emphasize context, and object and purpose, over themore arid textualism and effet utile heretofore applied, in order to bring con-sistency and rationality to the regulatory exceptions in WTO law.

III. Article I MFN treatment

The MFN anti-discrimination discipline expressed in Article I of GATTapplies not only to ordinary customs duties, but also to the matters refer-enced in Article III:2 and III:4, including as salient for our purposes, domes-tic regulation. Thus, for example, if the EU were to require carbon permitsfor imported goods in a way that reflected differences in the carbon regula-tion of different exporting states, it could violate the MFN obligation ofArticle I.

In the 1952 Belgian Family Allowances Panel report,47 the GATT Panelexamined a Belgian law imposing a charge on foreign goods purchased bypublic bodies when they originated in a country whose system of familyallowances did not meet specific requirements. Note that there was no basisfor distinguishing the physical characteristics of the goods. While the Panelfound it difficult to arrive at a “very definite ruling,” it stated that it “wasof the opinion that the Belgian legislation on family allowances was not onlyinconsistent with the provisions of Article I (and possibly with those of Arti-cle III, paragraph 2), but was based on a concept which was difficult toreconcile with the spirit of the General Agreement.”48

The Panel in Belgian Family Allowances explained as follows:

The consistency or otherwise of the system of family allowances inforce in the territory of a given contracting party with the re-quirements of the Belgian law would be irrelevant in this respect[the requirement that advantages be granted unconditionally],and the Belgian legislation would have to be amended insofar as itintroduced a discrimination between countries having a given sys-tem of family allowances and those which had a different systemor no system at all, and made the granting of the exemption de-pendent on certain conditions.49

The meaning of “like products” in Article I is probably closer to thescope of “like products” in Article III:4 than to that contained in Article

47. Report of the Panel, Belgium—Family Allowances, G/32 (Nov. 7, 1952), GATT BISD (1st Supp.)(1952).

48. Id. ¶ 8.49. Id. ¶ 3.



III:2.50 Thus, the fundamentally competition-based approach to “like prod-ucts” described above would be applied, presumably with the same type ofoutcome. That is, all steel of a certain type would be treated as like prod-ucts, and required to be treated the same, regardless of its origin, and re-gardless, for example, of how much carbon was used in the relevantproduction process.

However, in the more recent Canada—Autos case, the Panel rejected Ja-pan’s argument that Article I prohibits less favorable treatment based oncriteria unrelated to the product itself.51 The Panel found that:

A review of [previous dispute settlement] reports shows that theywere concerned with measures that were found to be inconsistentwith Article I:1 not because they involved the application of con-ditions that were not related to the imported product but becausethey involved conditions that entailed different treatment of im-ported products depending upon their origin.52

The Appellate Body did not reach this issue, but emphasized the uncondi-tional and broad scope of Article I:1 in finding that mere differential treat-ment of products originating in different member states, regardless of theproducer-based rationale, violates Article I:1. Although the Appellate Bodydid not emphasize this, its interpretation is based on the “like products”reference of Article I:1—automobiles are like products regardless ofwhether, in that case, their manufacturers have or have not invested in Ca-nada.53 Given the focus on Article I:1’s reference to the matters addressed inArticle III (national treatment), and to “any advantage,” it appears possiblethat “like products” regulated or taxed differently due to different produc-tion processes might result in a violation of MFN.54 The Panel

50. “Like products” as defined in Article III:2 is understood to be narrower than “like products” asdefined in Article III:4, due to the inclusion in Article III:2 of a separate discipline for a broader categoryof “directly competitive or substitutable” products. See Robert E. Hudec, “Like Product”: The Differences inMeaning in GATT Articles I and III, in Regulatory Barriers and the Principle of Non-Discrimi-nation in World Trade Law 101–123 (Thomas Cottier et. al. eds., 2000). See also William J. Davey &Joost Pauwelyn, MFN Unconditionality: A Legal Analysis of the Concept in View of its Evolution in the GATT/WTO Jurisprudence with Particular Reference to the Issue of “Like Product”, in Regulatory Barriers andthe Principle of Non-Discrimination in World Trade Law 13–50 (Thomas Cottier et. al. eds.,2000).

51. See Panel Report, Canada—Certain Measures Affecting the Automotive Industry, WTO Doc. WT/DS139/R / WT/DS142/AB/R (adopted Feb. 11, 2000).

52. Id. ¶ 10.25.53. Appellate Body Report, Canada—Certain Measures Affecting the Automotive Industry, ¶ 85, WTO

Doc. WT/DS139/AB/R / WT/DS142/AB/R (adopted May 31, 2000).54. For an example of a circumstance in which the fact of government certification did not provide

sufficient distinction to support a finding that products were not ‘like,’ see Report of the Panel, EuropeanEconomic Community—Imports of Beef from Canada, L/5099 (Mar. 10, 1981), GATT BISD (28th Supp.), at92 (1981). For an example of differential import licensing procedures violating Article I:1, see PanelReport, European Communities—Regime for the Importation, Sale and Distribution of Bananas, ¶¶7.188–7.193; 7.251–7.256; 7.235–7.241, WTO Doc. WT/DS27/R (adopted Sep. 25, 1997).



in Indonesia—Autos took a similar view.55

Thus, there is still some uncertainty as to whether national environmentalregulation that focuses on foreign PPMs would violate the MFN rule ofArticle I of GATT. But if a tribunal applied the competition-based approachto like products, and a competition-based approach to its analysis of the“any advantage” prong of Article I, we would expect to find a violation.

IV. GATT Article XX

Article XX of GATT provides general exceptions from obligations underGATT. Analysis under Article XX follows a two-step process: first, deter-mine whether the national measure found to violate another provision ofGATT preliminarily qualifies under one of the subheadings, and second,determine whether it meets the requirements of the “chapeau” of ArticleXX.

Article XX of GATT provides exceptions from any obligation underGATT, including those discussed above. So, importantly, even if a nationalenvironmental measure violates Articles I or III, it may still be permitted ifit satisfies the conditions set forth in Article XX. The most likely bases forexception would be Article XX(b) for measures necessary to protect human,animal, or plant life or health, or Article XX(g) for measures relating to theconservation of exhaustible natural resources. A measure must also satisfythe “chapeau” of Article XX, which requires that it not “constitute a meansof arbitrary or unjustifiable discrimination” or a “disguised restriction oninternational trade.” In this part, I will focus on the “necessary for the pro-tection of human, animal, or plant life or health” test in Article XX(b), the“relating to conservation of exhaustible natural resources test” in ArticleXX(g), and the chapeau.

A. Article XX(b)

In order to qualify for an exception under Article XX(b), the relevantmeasure must (i) be necessary, (ii) to protect human, animal, or plant life orhealth, and (iii) satisfy the requirement of the chapeau of Article XX to theeffect that it not be applied as arbitrary or unjustifiable discrimination, or adisguised restriction on trade. The burden of proof for each of these parame-ters is on the respondent. As explained below, in its Article XX jurispru-dence, the Appellate Body purports to engage in the type of nuancedjudgment that it avoids under Article III, but does not actually do so.

Traditionally in GATT, the exceptional provisions of Article XX(a), (b)and (d) have been available to justify measures otherwise incompatible with

55. See Panel Report, Indonesia—Certain Measures Affecting the Automobile Industry, ¶¶ 14.145–14.147,WTO Doc. WT/DS54/R / WT/DS55/R / WT/DS59/R / WT/DS64/R and Corr. 1 and 2 (adopted July23, 1998).



other GATT provisions if those measures are “necessary” to achieve certainpolicy objectives. This has been interpreted to require that the country in-voking these exceptions demonstrate that no other more WTO-compatibleor less-restrictive alternative was reasonably available to pursue the desiredpolicy goal.

A contracting party cannot justify a measure inconsistent withanother GATT provision as ‘necessary’ in terms of Article XX(d)if an alternative measure which it could reasonably be expected toemploy and which is not inconsistent with other GATT provi-sions is available to it. By the same token, in cases where a mea-sure consistent with other GATT provisions is not reasonablyavailable, a contracting party is bound to use, among the measuresreasonably available to it, that which entails the least degree ofinconsistency with other GATT provisions.56

The Article XX necessity test was addressed in Korea—Various Measures onBeef, where Korea attempted to justify its dual retail system for beef byarguing the need for compliance with a domestic regulation against fraud.The Appellate Body interpreted the necessity test of Article XX(d) to implya requirement for balancing among at least three variables:

In sum, determination of whether a measure, which is not ‘indis-pensable’, may nevertheless be “necessary” within the contempla-tion of Article XX(d), involves in every case a process of weighingand balancing a series of factors which prominently include thecontribution made by the compliance measure to the enforcementof the law or regulation at issue, the importance of the commoninterests or values protected by that law or regulation, and theaccompanying impact of the law or regulation on imports orexports.57

After reiterating that WTO Members have the right to determine for them-selves the level of enforcement of their domestic laws,58 the Appellate Bodycalled for an “authentic” balancing and weighing of (at least) these vari-ables: “The more vital or important those common interests or values are,the easier it would be to accept as ‘necessary’ a measure designed as anenforcement instrument;”59 “[t]he greater the contribution [to the realiza-

56. Report of the Panel, United States—Section 337 of the Tariff Act of 1930, ¶ 5.26, L/6439 (Nov. 7,1989), GATT BISD (36th Supp.), at 45 (1989). See also Report of the Panel, United States—MeasuresAffecting Alcoholic and Malt Beverages, ¶ 5.52, DS23/R (June 19, 1992), GATT BISD (39th Supp.), at 71(1992); Report of the Panel, Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, ¶ 23,DS10/R (Nov. 7, 1990), GATT BISD (37th Supp.), at 7 (1990).

57. Appellate Body Report, Korea—Various Measures on Beef, ¶ 164, WTO Doc. WT/DS161/AB/R /WT/DS169/AB/R (adopted Dec. 11, 2000).

58. See id. ¶ 177.59. Id. ¶ 162.



tion of the end pursued], the more easily a measure might be considered tobe ‘necessary;’ ” 60 and “[a] measure with a relatively slight impact uponimported products might more easily be considered as ‘necessary’ than ameasure with intense or broader restrictive effects.”61

While this sounds like the type of proportionality or balancing test thatwould seek to maximize the combination of environmental protection andincreased welfare from trade, it is noteworthy that this test has never beenapplied as described. On the other hand, in view of the excessively restrictiveapproach to Article III, it is comforting that Article XX often seems to beapplied with excessive deference. So, while the jurisprudence is unsatisfac-tory and unpredictable, the results have so far not been highly objectionable.

In U.S.—Gambling (2005) (interpreting the similar provisions of theGeneral Agreement on Trade in Services), the Appellate Body further clari-fied the process for determining whether or not a measure is “necessary.”First, the responding party must make a prima facie case that its measure is“necessary” by “weighing and balancing” the factors outlined in Korea—Various Measures on Beef. Then, if the complaining party raises an alternativemeasure that it feels the responding party could have taken, it is for theresponding party to rebut, showing that the proposed alternative does notachieve the regulatory goal or is not reasonably available. In contrast to cer-tain GATT decisions in the pre-WTO era, the Appellate Body thereby de-termined that the burden of proof was not on the responding Member todemonstrate that there are no reasonably available alternatives, but rather forthe complaining Member to make a prima facie case that there are.62 Moreo-ver, the Appellate Body held that an alternative measure may not be consid-ered reasonably available “where it is merely theoretical in nature, forinstance, where the responding Member is not capable of taking it, or wherethe measure imposes an undue burden on that Member, such as prohibitivecosts or substantial technical difficulties.”63

The Appellate Body’s synthesis of these two steps of the necessity test iscontained in its China—Publications and Audiovisual Products decision:

In each case, a sequential process of weighing and balancing aseries of factors was involved. US – Gambling sets out a sequenceby using the phrases: “The process begins with an assessment ofthe ‘relative importance’ of the interests or values furthered by thechallenged measure”; “Having ascertained the importance of theparticular interests at stake, a Panel should then turn to the otherfactors that are to be ‘weighed and balanced’”; and “A compari-

60. Id. ¶ 163.61. Id.62. See Appellate Body Report, United States—Measures Affecting the Cross-Border Supply of Gambling

and Betting Services, ¶¶ 306–311, WTO Doc. WT/DS285/AB/R (adopted Apr. 7, 2005) [hereinafterU.S.—Gambling].

63. Id. ¶ 308.



son between the challenged measure and possible alternativesshould then be undertaken.” The description of this sequence inBrazil – Retreaded Tyres mentions, first, the relevant factors to beweighed and balanced for the measure sought to be justified, andcontinues that the result of this analysis “must be confirmed bycomparing the measure with possible alternatives, which may beless trade restrictive while providing an equivalent contributionto the achievement of the objective”. Although the language usedis not identical, both reports articulate the same approach and,like the Appellate Body report in Korea – Various Measures on Beef,emphasize the need to identify relevant factors and undertake aweighing and balancing process including, where relevant, withrespect to proposed alternative measures that may be less traderestrictive while making an equivalent contribution to the rele-vant objective.64

In Brazil—Tyres, in the case of alternatives to Brazil’s import ban on re-treaded tires, such as landfilling, which might have reduced the number ofwaste tires, but would entail side effects that might have diminished health,the Panel came up empty-handed because it provided no analysis of therelative magnitude of each risk. Here we see that it is impossible to weighand balance, or even to evaluate alternatives in this context without sometype of information regarding magnitude. Brazil’s actual ban was theorized tocontribute to health by reducing the number of waste tires, while otheralternatives might also reduce the number of waste tires or otherwise reducethe adverse effects of waste tires, at some cost in terms of other dimensionsof health. And yet, the Panel rejected alternatives on the ground that theywere likely to have some collateral deleterious effect on health, without as-sessing the magnitude of this effect.65 Without knowing the magnitude ofeach effect, it is impossible to know whether Brazil’s import ban, or thealternative, protects health better, or whether it is justified when comparedto its adverse trade effects.

According to the Appellate Body, “the weighing and balancing is a holis-tic operation that involves putting all the variables of the equation togetherand evaluating them in relation to each other after having examined themindividually, in order to reach an overall judgment . . . [T]he contribution ofthe measure has to be weighed against its trade restrictiveness . . . .”66 Itdefies understanding how this weighing could be done, and how the Appel-late Body could agree with the Panel that “the contribution of the Import

64. Appellate Body Report, China—Measures Affecting Trading Rights and Distribution Services for Cer-tain Publications and Audiovisual Entertainment Products, ¶ 242, WTO Doc. WT/DS363/AB/R (adoptedJan. 19, 2010) [citations omitted].

65. See Panel Report, Brazil—Measures Affecting Imports of Retreaded Tyres, WTO Doc. WT/DS332/R(adopted Dec. 17, 2007), as modified by Appellate Body Report WT/DS332/AB/R.

66. Appellate Body Report, Brazil—Tyres, ¶ 82.



Ban to the achievement of its objective outweighs its trade restrictiveness”67

without an assessment of the magnitude of the contribution of the importban. How could one value possibly be said to outweigh the other when ithas not been measured? Thus, this is no balancing test.

While the full weighing and balancing under Article XX necessity an-nounced in Korea—Beef was not expected by the diplomats who negotiatedthe WTO, or their governments, the least restrictive alternative test wasclearly intended. After all, in addition to the fact that the least restrictivealternative test is the natural meaning of the word “necessary,” this test hadbeen enunciated in the GATT jurisprudence under Article XX, and wasexplicitly adopted (as a least trade restrictive alternative test) in a similarcontext in the TBT Agreement and in the SPS Agreement. Furthermore, ithas been explicitly adopted by the Appellate Body. Therefore, it seems rea-sonable to say that the Appellate Body has backed away from its mandate.

States determined, in the Uruguay Round, that one of the functions ofdispute settlement would be to identify in these contexts the existence ofless “treaty inconsistent” or less trade restrictive alternatives that wouldcontribute equivalently to the achievement of the relevant goal. They im-plicitly appointed the Panels and the Appellate Body to serve as their agentsto perform this function. The Appellate Body has refused this mandate.

It appears that the Panel, and the Appellate Body, sought to be deferen-tial to Brazil’s regulatory autonomy, especially in the environmental con-text. It is easy to see why this is an attractive course. But in order torationalize deference, the decisions have done much violence to text, to pre-cedent, and to legal logic. Furthermore, this approach cannot be explainedby judicial modesty in the face of difficult public policy questions. Indeed, abalancing or least restrictive alternative examination in this case poseddaunting problems of judicial determination of public policy parameters.But the Panel and the Appellate Body in Brazil—Tyres did not avoid thistype of determination: they made it, using vague and unsatisfactorily con-clusory statements, rather than seeking the best data available.68 The Appel-late Body noted, wistfully, that certain “estimates would have been veryuseful and, undoubtedly, would have strengthened the foundation of thePanel’s findings.”69

B. Article XX(g)

In order to qualify for an exception under Article XX(g), the relevantmeasure must (i) relate to the conservation of exhaustible natural resources,(ii) be made effective in conjunction with restrictions on domestic produc-

67. Id. ¶ 179.68. For a similar criticism in another context of Panel and Appellate Body analysis, see Andre Sapir &

Joel P. Trachtman, Subsidization, Price Suppression, and Expertise: Causation and Precision in Upland Cotton,7:1 World Trade Rev. 183 (2008).

69. Appellate Body Report, Brazil—Tyres, ¶ 153.



tion or consumption, and (iii) satisfy the requirement of the chapeau of Arti-cle XX to the effect that it not be applied as arbitrary or unjustifiablediscrimination, or a disguised restriction on trade. The burden of proof foreach of these parameters is on the respondent. Note that instead of the “nec-essary” test of Article XX(b), here we have a “relating to” test.

The first question to be answered under Article XX(g) is whether there isan exhaustible natural resource being protected by the national measure. InU.S.—Gasoline, the Panel determined that clean air qualifies as an exhaus-tible natural resource, on the basis that it has a value and is therefore aresource, that it can be depleted and is thus exhaustible, and that it is natu-ral.70 In U.S.—Shrimp, the Appellate Body interpreted the term “exhaus-tible natural resources” in an evolutionary manner, referring to“contemporary concerns of the community of nations about the protectionand the conservation of the environment.”71 On this basis, the AppellateBody declined to interpret “exhaustible natural resource” in accordancewith its original meaning, which may have been confined to non-living re-sources, and thereby advanced environmental protection.

In its U.S.—Gasoline report, although the parties had both relied on theGATT “primarily aimed at” test for whether a measure is “related to” theexhaustion of natural resources, the Appellate Body noted that the thresholdof Article XX(g) did not contain a requirement that the measure be “prima-rily aimed at,” but only a requirement that the measure be “related to.”72

The Appellate Body examined whether “the means (the challenged regula-tions) are, in principle, reasonably related to the ends.”73

In U.S.—Shrimp, the Appellate Body appears to have abandoned the “pri-marily aimed at” test and focused on the means–ends relationship74 betweenthe measure and the goal pursued: “we must examine the relationship be-tween the general structure and design of the measure here at stake, Section609, and the policy goal it purports to serve, that is, the conservation of seaturtles.”75 The “relating to” requirement under Article XX(g) has since

70. See Panel Report, United States—Standards for Reformulated and Conventional Gasoline, WT/DS2/R,adopted 20 May 1996, as modified by Appellate Body Report, WT/DS2/AB/R, ¶ 6.37.

71. Appellate Body Report, U.S.—Shrimp, ¶ 129.72. Appellate Body Report, U.S.—Gasoline, at 17–22. In particular, participants and third parties

agree that: “we see no need to examine this point further, save, perhaps, to note that the phrase “primarilyaimed at” is not itself treaty language and was not designed as a simple litmus test for inclusion or exclusion fromArticle XX.” Id. at 21–22 (emphasis added).

73. Id. at 20–22.74. See Appellate Body Report, U.S.—Shrimp, ¶¶ 156–60.75. See id. ¶ 137; see also id. ¶ 141 (“Focusing on the design of the measure here at stake, it appears to

us that Section 609, cum implementing guidelines, is not disproportionately wide in its scope and reachin relation to the policy objective of protection and conservation of sea turtle species. The means are, inprinciple, reasonably related to the ends. The means and ends relationship between Section 609 and thelegitimate policy of conserving an exhaustible, and, in fact, endangered species, is observably a close andreal one, a relationship that is every bit as substantial as that which we found in United States—Gasolinebetween the EPA baseline establishment rules and the conservation of clean air in the United States.”).



been defined as a “close and genuine relationship of ends and means.”76 InChina—Rare Earths, the Appellate Body affirmed the means–ends relation-ship requirement articulated in China—Raw Materials, adding that therewas no requirement under Article XX(g) that the purpose of the challengedmeasure must be to make effective restrictions on domestic production orconsumption.77

In China—Rare Earths, China argued, under Article XX(g), that its mea-sure made a “contribution” to the conservation of natural resources, borrow-ing the “contribution” concept from Article XX(b) jurisprudence, where,indeed, the contribution is permitted to be relatively small. However, theAppellate Body insisted on a formal separation of concepts:

In the light of the different connecting words used, we considerthat a mixing of the different tests under Article XX(b) and Arti-cle XX(g), absent of context, would result in an approach thatignores the important distinctions between the various subpara-graphs of Article XX.78

Here, one might have taken a different approach, based not on effet utilebut on the object and purpose of the treaty, recognizing that while the con-necting words are different, the substantive concept and purpose—that thenational measure must be authentic enough to make a measurable contribu-tion to the purported goal—is similar. Context, object, and purpose wouldcounsel a less hermetically (and hermeneutically) sealed approach to thesedifferent subparagraphs. Excessive formalism can result in the erection oflinguistic or jurisprudential structures that may not have been intended bythe drafters and, more importantly, that may fail to encompass the substan-tive nuance of real life situations.

On appeal, China argued that the Panel had inappropriately declined toexamine evidence of actual effects on conservation. The Appellate Body con-ceded that “the text of Article XX(g) does not prescribe a specific analyticalframework for assessing whether a measure satisfies the component require-ments of that provision.” But it continued that “all the same, we observethat, in past disputes, the Appellate Body has emphasized the importance ofthe design and structure of the challenged measure to a proper assessment ofwhether a measure satisfies the requirements of Article XX(g).”79 It went onto argue that focus on “design and structure” allows the Panel to go beyondthe text of the national measure, and even beyond nominal intent, which

76. Appellate Body Report, U.S.—Shrimp, ¶ 136.77. See Appellate Body Report, China—Measures Related to the Exportation of Various Raw Materials, ¶¶

356, 361, WTO Doc. WT/DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R (adopted Feb. 22,2012).

78. Appellate Body Report, China—Measures Related to the Exportation of Rare Earths, Tungsten, andMolybdenum, ¶ 5.116, WTO Doc. WT/DS431,432,433/AB/R (adopted Aug. 29, 2014) [hereinafterChina—Rare Earths].

79. Id. ¶ 5.96.



seems necessary to a substantive analysis, but then it agreed with the Panel,and with prior jurisprudence, that it is not necessary to determine the em-pirical effects of the measure.80

Here, as in the case of Article III, the Appellate Body has developed ajurisprudence interpreting “relating to” in a narrow way that fails to dojustice to the plain language of Article XX(g). Rare Earths is a good exampleof a circumstance where it is quite difficult to determine whether the Chi-nese measure relates to conservation without examining its effects. By fore-closing this evidence, the Appellate Body artificially curtailed its ability toapply the treaty provision. Nor does the Appellate Body present a basis ininterpretative practice for this limitation.

The Panel based its decision that China’s export quotas do not “relate toconservation” on the Panel’s view that, while China’s export quotas wouldinduce conservation on the part of foreign consumers, it would also send a“perverse signal” of lower prices in the domestic market, inducing reducedconservation by domestic consumers. The Panel’s statement on applicationof Article XX(g) is worth quoting at length:

The Panel takes note of China’s indication that various rare earthrecycling projects, efforts to modify industrial designs of down-stream products so that they use less rare earths, and develop-ments of rare earth substitutes are under way. The Panelacknowledges that these efforts may go a long way towards fur-thering what all involved in this dispute recognize is China’s bonafide conservation policy. Nevertheless, our consideration of thedesign and architecture of China’s export quota on rare earths doesnot convince us that the export quota is designed in such a way asto ensure that domestic demand is not stimulated by low prices.There does not appear to be any mechanism to ensure that theexport quota is set at such a level that, in combination with theextraction and/or production caps, no perverse incentives will besent to domestic consumers.81

Here, the Panel’s failure to consider actual effects becomes determinative,and improperly so. The Panel examined design and structure, finding thatthere is some reduction of foreign consumption, but that the “perverse in-centives” expand domestic consumption. This is definitely true in theoryand we would expect it to be true in practice.

But the Panel never evaluated the magnitude of the foreign reduction,and the magnitude of the effect of the perverse incentives. Note the lan-guage of the Panel’s statement: China must ensure that no perverse incen-

80. Id. ¶ 5.98 (citing U.S.—Gasoline, at 21).81. Panel Report, China—Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, ¶

5.210, WTO Doc. WT/DS431/R / WT/DS432/R / WT/DS433/R (adopted Dec. 13, 2013) [hereinafterRare Earths Panel Reports]; see also id. ¶¶ 7.172–7.179, 7.448.



tives are sent. But in order to “relate to” conservation, should it not beenough if the effects of the perverse incentives are less than the effects of theconservation incentives? If actual effects are not examined, then all the Panelhas to support a determination that the Chinese measure does not relate toconservation is its speculation about the relative magnitudes of the effects.

The Appellate Body simply approved the Panel’s reasoning in this con-text.82 This seems too high a burden to set in connection with the “relatingto” test: China was not required to eliminate perverse incentives, but toshow that the overall mechanism results in some measure of conservation.Furthermore, by declining to examine actual effects, the Panel precludedpresentation of evidence regarding the relative magnitudes of the effects.

China also challenged the Panel’s finding that the “in conjunction with”requirement is to be evaluated, again, based only on structure and design,and not on actual effects. So, here, although the Appellate Body upheld thePanel’s reasoning on the basis that the Panel never stated that it was pre-cluded from examining actual effects, it appears that examination of effectswill rarely, if ever, be appropriate. The Appellate Body referred to its earlierresponse to China’s claim regarding “relating to,” stating, somewhat auda-ciously, that “the legal characterization of a measure cannot be contingentupon the occurrence of subsequent events.”83 Let us be clear that the Appel-late Body is stating that actual effects are not material to the legal character-ization of a measure. This certainly is not true in other areas of law, such asmurder, or even in other areas of WTO law, such as the law of subsidies.

This language is striking, because the plain language of Article XX(g)—asking whether a measure relates to conservation of exhaustible natural re-sources and whether it is made effective in conjunction with domestic re-strictions on production or consumption—would ordinarily be understoodas asking whether the measure actually conserves natural resources andwhether domestic production or consumption is actually restricted. Here,the Appellate Body seems to have added words of limitation that are notcontained in Article XX(g).

Thus, in this decision, the Appellate Body appears to seek to avoid impos-ing difficult evidentiary and judgmental burdens on panels and on itself,and to protect the integrity of its jurisprudence by sacrificing the plain lan-guage of the treaty, also apparently inconsistently with the context, object,and purpose of that language. Furthermore, one might say that the Appel-late Body is protecting the legal professional monopoly over determinationsunder Article XX(g) from encroachment by a more empirical methodology.

82. See Appellate Body Report, China—Rare Earths, ¶ 5.156.83. Id. ¶ 5.138.



C. Extraterritoriality in Articles XX(b) and (g)

During the GATT era, the second Tuna Panel found that it was permissi-ble under Article XX to protect animals outside the territorial jurisdictionof the regulating state.84 Since the advent of the WTO, the Appellate Bodyhas not yet provided a definitive interpretation as to whether relevant provi-sions of Article XX, such as Article XX(b) or (g), of GATT, allow excep-tions for actions by importing states to protect values outside theirterritory.85 In U.S.—Shrimp, the Appellate Body avoided addressing this is-sue on the grounds that the relevant “exhaustible natural resource”—seaturtles—were migratory and might enter U.S. waters.86 However, the Ap-pellate Body suggested that there must be “sufficient nexus” between theprotected value (in that case the sea turtles) and the regulating state.

In its Tuna II decisions, under the TBT Agreement, the Appellate Bodyaccepted that a “legitimate regulatory goal” may include the protection ofdolphins outside the territorial jurisdiction of the regulating state. Whilethis does not necessarily mean that Article XX can exempt measures seekingto address the listed goals outside the territory of the regulating state, it is astep in that direction.

D. The Chapeau of Article XX

Even if a measure satisfies the requirements for Article XX(b) or (g), itmust still satisfy the requirements of the chapeau of Article XX in order toqualify for an exception. The chapeau establishes three standards regardingthe application of measures for which justification under Article XX may besought: first, there must be no “arbitrary” discrimination between countrieswhere the same conditions prevail; second, there must be no “unjustifiable”discrimination between countries where the same conditions prevail; and,third, there must be no “disguised restriction on international trade.”87

Therefore, a violation of any of these standards would suffice to disqualifythe measure under Article XX. Yet, the standards embodied in the languageof the chapeau of Article XX are not only different from the requirements ofthe remainder of Article XX, but are also different from the standards usedfor the substantive violations of GATT.88

84. Report of the Panel, U.S.—Tuna I, ¶ 5.20.85. For a useful discussion in the human rights context, see Lorand Bartels, Article XX of GATT and

the Problem of Extraterritorial Jurisdiction – The Case of Trade Measures for the Protection of Human Rights, 36 J.World Trade 353 (2002).

86. See Appellate Body Report, U.S.—Shrimp, ¶ 133.87. See Appellate Body Report, U.S.—Gasoline, at 23; Appellate Body Report, United States—Import

Prohibition of Certain Shrimp and Shrimp Products: Recourse to Article 21.5 of the DSU by Malaysia, ¶ 118,WTO Doc. WT/DS58/AB/RW (adopted Oct. 22, 2001); Appellate Body Report, U.S.—Shrimp, ¶ 150.

88. See Appellate Body Report, U.S.—Shrimp, ¶ 150. See also Appellate Body Report, EC—Asbestos, ¶115: “Article III:4 and Article XX(b) are distinct and independent provisions of the GATT 1994 each tobe interpreted on its own. The scope and meaning of Article III:4 should not be broadened or restrictedbeyond what is required by the normal customary international law rules of treaty interpretation, simply



The Appellate Body in Shrimp (faced with a measure benefiting from aprovisional justification under Article XX(g)) examined, under the chapeauof Article XX, whether less trade restrictive alternatives were reasonablyavailable to the United States and whether the restrictiveness of the measurewas somehow disproportionate, since similar costs were not at all imposedon domestic producers.89 In other words, even after Article XX(g) itself issatisfied, a least trade restrictive alternative analysis akin to a “necessity”test seems to be performed under the chapeau of Article XX.

As part of the less trade restrictive alternative analysis, one question iswhether the respondent has made sufficient attempts to engage in “across-the-board negotiations with the objective of concluding bilateral or multi-lateral agreements”90 regarding the concern at issue. The Appellate Bodyfound in the Shrimp case that the “most conspicuous flaw” in the U.S. mea-sure was “its intended and actual coercive effect on the specific policy deci-sions made by foreign governments.”91 The Appellate Body stated that theU.S. measure was, “an economic embargo which requires all other exportingMembers, if they wish to exercise their GATT rights, to adopt essentiallythe same policy (together with an approved enforcement program) as thatapplied to, and enforced on, United States domestic shrimp trawlers.”92

Under the chapeau it is permissible to treat different countries differently,so long as the discrimination is not arbitrary, is justifiable, and is based onsalient differences. Purity of motive is important. To the extent that importsfrom different sources, or even imports of different types, are treated differ-ently for reasons that are not reflected in the justifying purpose under Arti-cle XX(b) or XX(g), a national import restriction may be determined toinclude arbitrary or unjustifiable discrimination.93

Due process in a national import restriction regime would be necessary.The Appellate Body found the U.S. certification process at issue in theU.S.—Shrimp case to constitute arbitrary discrimination because exportingcountries were “denied basic fairness and due process, and are discriminatedagainst, vis-a-vis those Members which are granted certification.”94

In Brazil—Tyres, the Appellate Body held that discrimination within thechapeau is arbitrary or unjustifiable “when the reasons given for this dis-crimination bear no rational connection to the objective falling within the

because Article XX(b) exists and may be available to justify measures inconsistent with Article III:4. Thefact that an interpretation of Article III:4, under those rules, implies a less frequent recourse to ArticleXX(b) does not deprive the exception in Article XX(b) of effet utile. Article XX(b) would only be de-prived of effet utile if that provision could not serve to allow a Member to “adopt and enforce” measures“necessary to protect human . . . life or health.”

89. See Appellate Body Report, U.S.—Shrimp, ¶ 171.90. Id. ¶ 166.91. Id. ¶ 161.92. Id.93. See Appellate Body Report, Brazil—Retreaded Tyres, ¶ 227; see also Appellate Body Report, EC—

Seal Products, ¶ 5.306.94. Appellate Body Report, U.S.—Shrimp, ¶ 181.



purview of a paragraph of Article XX . . . .”95 This limits the scope for mea-sures with multiple purposes. The Appellate Body softened this line slightlyin Seal Products: “one of the most important factors in the assessment ofarbitrary or unjustifiable discrimination is the question of whether the dis-crimination can be reconciled with, or is rationally related to, the policyobjective with respect to which the measure has been provisionally justifiedunder one of the subparagraphs of Article XX.”96

In sum, Article XX offers justifications that can lead to exemption fromany provision of GATT,97 in situations where the trade restriction or dis-crimination is viewed as necessary, or otherwise appropriately and propor-tionately related to the implementation of the policies listed in Article XX.

V. Multilateral Environmental Agreements (MEAs)

So far, this article has focused on the relationship between trade and envi-ronment within the WTO legal universe. But in the broader universe ofinternational law, of course, trade law and environmental law are of equalweight, and conflicts between them can be worked out diplomatically. Tosome extent, they can also be worked out judicially, although it is unlikelythat the WTO Appellate Body will directly apply international environ-mental law.

The reluctance of the Appellate Body to do so, as described below, and asprobably dictated by the DSU, leaves open the possibility for a ruling hold-ing a member state in violation for a measure that is required by interna-tional environmental law. So far, Article XX has avoided direct conflictbetween international environmental law and international trade law inWTO dispute settlement, but some measures required by international en-vironmental law might not be justified under Article XX. For example, themeasure required by international environmental law may, for otherwise ap-propriate reasons, not be the least WTO inconsistent means to achieve theenvironmental goal, and therefore may not be “necessary” under ArticleXX(b).

The Appellate Body in the early U.S.—Gasoline report memorably wrotethat the GATT “is not to be read in clinical isolation from public interna-tional law.”98 Similarly, in the U.S.—Shrimp case, the Appellate Body re-

95. Appellate Body Report, Brazil—Retreaded Tyres, ¶ 227 (emphasis added).96. Appellate Body Report, EC—Seal Products, ¶ 5.318.97. See Appellate Body Report, U.S.—Gasoline, at 24 (“The exceptions listed in Article XX thus

relate to all of the obligations under the General Agreement: the national treatment obligation and themost-favoured-nation obligation, of course, but others as well. Effect is more easily given to the words“nothing in this Agreement”, and Article XX as a whole including its chapeau more easily integratedinto the remainder of the General Agreement, if the chapeau is taken to mean that the standards it setsforth are applicable to all of the situations in which an allegation of a violation of a substantive obligationhas been made and one of the exceptions contained in Article XX has in turn been claimed.”).

98. Appellate Body Report, U.S.—Gasoline, at 17.



ferred to “modern international conventions and declarations” in order tointerpret the terms “exhaustible” and “natural resources” in Article XX(g)of GATT.99

The WTO Dispute Settlement Understanding (DSU) does not explicitlyspecify the body of applicable law that WTO adjudicators are assigned tointerpret and apply, although it does provide that the mandate to Panels andthe Appellate Body is “to clarify the existing provisions of the [WTO cov-ered agreements],” which are listed in Appendix 1 to the DSU.100 The Ap-pellate Body has said clearly that WTO adjudicators are not empowered tointerpret non-WTO international law for purposes of applying non-WTOinternational law.

In the 2006 Mexico—Soft Drinks case, the Appellate Body stated that itwould be inappropriate for a Panel to make a determination whether theUnited States had acted inconsistently with its NAFTA obligations.101 Itdeclined to accept “Mexico’s interpretation [which] would imply that theWTO dispute settlement system could be used to determine rights and ob-ligations outside the covered agreements.”102 While the Appellate Body de-termined that it could not “determine rights and duties outside the coveredagreements,” it did not explicitly state that it could not give effect to rightsand duties outside the covered agreements in assessing claims based onWTO law.

Of course, if an MEA were understood to actually modify WTO coveredagreements, then the covered agreements, as modified, would be applicableas law in WTO dispute settlement. However, in Peru—Agricultural Products,the Appellate Body held that other treaties, such as free trade agreements,do not modify WTO obligations under Article 41 of the VCLT, because“the WTO Agreements contain specific provisions addressing amendments,waivers, or exceptions for regional trade agreements, which prevail over”Article 41.103 Therefore, it is unlikely that an MEA would be applicable aslaw in WTO dispute settlement.

The combination of the Mexico—Soft Drinks and Peru—Agricultural Prod-ucts decisions means that WTO dispute settlement will not determine rightsand duties under other international law, and that this other internationallaw, even if it is somehow made definitive, will not modify existing WTO

99. Appellate Body Report, U.S.—Shrimp, ¶ 130.100. Understanding on Rules and Procedures Governing the Settlement of Disputes, art. 3.2, Apr.

15, 1994, 1869 U.N.T.S. 401.101. See Appellate Body Report, Mexico—Tax Measures on Soft Drinks and Other Beverages, ¶ 56, WTO

Doc. WT/DS308/AB/R (adopted Mar. 24, 2006).102. Id.103. Appellate Body Report, Peru—Additional Duty on Imports of Certain Agricultural Products, ¶

5.112, WTO Doc. WT/DS457/AB/R (adopted July 31, 2015). See also Joel P. Trachtman, Jurisdictionin WTO Dispute Settlement, in Key Issues in WTO Dispute Settlement: The First Ten Years 132,(Rufus Yerxa & Bruce Wilson eds., 2005); Joel P. Trachtman, Book Review, 98 Am. J. Int’l l. 855(2004) (reviewing Joost Pauwelyn, Conflict of Norms in Public International Law: HowWTO Law Relates to Other Rules of International Law (2003)).



law. The only influence that other WTO law can have, then, is ininterpretation.

The WTO Appellate Body has used non-WTO international law in theinterpretation of WTO law. Article 31(3)(c) of the VCLT specifically in-structs that interpreters shall “take into account . . . any relevant rules ofinternational law applicable in the relations between the parties.”104 Fur-thermore, the Appellate Body has not yet definitively addressed the questionas to whether the other relevant rules of international law used in interpreta-tion under Article 31(3)(c) of the VCLT are limited to those to which allWTO members subscribe, or whether they only need bind the parties to theparticular dispute.105

In the EC—Biotech case, the Panel determined that “Article 31(3)(c)should be interpreted to mandate consideration of rules of international lawwhich are applicable in the relations between all parties to the treaty whichis being interpreted.”106 Therefore, only those international legal rules towhich all WTO Members are party, such as general customary internationallaw or treaties that include all WTO Members, would be required to betaken into account. The Panel observed that “requiring that a treaty beinterpreted in the light of other rules of international law which bind theStates parties to the treaty ensures or enhances the consistency of the rules ofinternational law applicable to these States and thus contributes to avoidingconflicts between the relevant rules.”107 This position was subsequently crit-icized in a report of the International Law Commission.108 In the EC—Bi-otech case, since the complainants (as well as many other WTO Members)had not ratified the Biosafety Protocol, the Panel found that the language of

104. VCLT, supra note 21, art. 31(3)(c). R105. Appellate Body Report, European Communities and Certain Member States—Measures Affecting Trade

in Large Civil Aircraft, ¶¶ 845–46, WTO Doc. WT/DS316/AB/R (adopted Mar. 23, 2012).106. Panel Report, European Communities—Measures Affecting the Approval and Marketing of Biotech Prod-

ucts, ¶ 7.70, WTO Doc. WT/DS291/R, WT/DS292/R, WT/DS293/R (adopted Nov. 21, 2006) [herein-after EC—Biotech].

107. Id.108. See Study Group of the Int’l Law Comm’n, Fragmentation of International Law: Difficulties

Arising from the Diversification and Expansion of International Law, U.N. Doc. A/CN.4/L.682, at226–28, 237–39 (Apr. 13, 2006) (finalized by Martti Koskenniemi) (“The Panel buys what it calls the“consistency” of its interpretation of the WTO Treaty at the cost of the consistency of the multilateraltreaty system as a whole. It aims to mitigate this consequence by accepting that other treaties maynevertheless be taken into account as facts elucidating the ordinary meaning of certain terms in therelevant WTO treaty. This is of course always possible and, as pointed out above, has been done in thepast as well. However, taking “other treaties” into account as evidence of “ordinary meaning” appears arather contrived way of preventing the “clinical isolation” as emphasized by the Appellate Body . . . . Abetter solution is to permit reference to another treaty provided that the parties in dispute are also partiesto that other treaty. In addition, it might also be useful to take into account the extent to which thatother treaty relied upon can be said to have been “implicitly” accepted or at least tolerated by the otherparties “in the sense that it can reasonably be considered to express the common intentions or under-standing of all members as to the meaning of the . . . term concerned.”)



Article 31(3)(c) of the VCLT did not require it to take the Biosafety Proto-col into account in the interpretation of the WTO treaty.109

The Panel in the EC—Biotech case nonetheless left open the possibilitythat a Panel would have discretion to take into account another internationaltreaty where the parties to the dispute had each ratified that other treaty.110

In addition, it recognized that other rules of international law might informthe interpretation of WTO law as applied to a particular factual context,rather than as rules of law.

The EC—Biotech Panel also maintained, although in a more circum-scribed manner, that:

[O]ther relevant rules of international law may in some cases aid atreaty interpreter in establishing, or confirming, the ordinarymeaning of treaty terms in the specific context in which they areused. Such rules would not be considered because they are legalrules, but rather because they may provide evidence of the ordi-nary meaning of terms in the same way that dictionaries do.111

An important example of this use of other international law is the Appel-late Body decision in U.S.—Shrimp, in which the Appellate Body used theInter-American Convention for the Protection and Conservation of Sea Tur-tles to mark out the “line of equilibrium” under the chapeau of ArticleXX.112

While it is clear that a limited mandate for the Appellate Body’s andPanels’ jurisdiction accentuates the phenomenon of “fragmentation” of in-ternational law, pursuant to which different types of international law areseparated both at the negotiation and at the implementation stages, it is alsopossible that states would prefer different types of dispute settlement mech-anisms for different types of international law. Thus, the acceptance of thistype of fragmentation could be viewed as an acceptance of an institutionalchoice made by states: a choice to differentiate among different types ofinternational law in terms of the available institutional infrastructure. Yet,this choice accentuates the possibility that the conflict between trade lawand environmental law will not be managed judicially at the WTO.

109. Argentina and Canada had signed the Biosafety Protocol but not ratified it, while the UnitedStates had not signed it. Argentina and Canada had signed and ratified the underlying Convention onBiodiversity, while the United States had signed it but not ratified it. EC—Biotech, ¶ 7.74.

110. EC—Biotech, ¶ 7.72 (“It is important to note that the present case is not one in which relevantrules of international law are applicable in the relations between all parties to the dispute, but notbetween all WTO Members, and in which all parties to the dispute argue that a multilateral WTOagreement should be interpreted in the light of these other rules of international law. Therefore, we neednot, and do not, take a position on whether in such a situation we would be entitled to take the relevantother rules of international law into account.”).

111. Id. ¶ 7.92.112. Appellate Body Report, U.S.—Shrimp, ¶¶ 159, 170.



VI. A critique of textualism at the WTO in the trade andenvironment context

At the founding of the WTO, member states sought to establish a morelegalistic approach to adjudication and interpretation, compared to the ap-proach that developed during the GATT period. The DSU included a spe-cific reference to the customary international law rules of interpretation,understood to mean the provisions of the VCLT addressing interpretation.While the Appellate Body has often taken this instruction to mean that itmust focus on text, the relevant language of the Vienna Convention callsalso for references to context, object, and purpose, and where those referencesleave the meaning obscure or absurd, to the circumstances of the treaty’sconclusion and its preparatory work.

For example, in developing its Article III jurisprudence, the AppellateBody has focused on the different formulations in the two sentences of Arti-cle III:2 and in Article III:4. Yet the basic context, object and purpose, asset by Article III:1, is the same. So, in this type of case, the judge is facedwith a choice between applying the effet utile principle to honor the differ-ences in slightly differing language, or giving effect to the overall statedpurpose in a coherent fashion. Indeed, in the Article III context, it turnedout that effet utile was a janus-faced trap, requiring the Appellate Body togive a meaning to “like products” where it appears in Article III:2 that isdifferent from its meaning where it appears in Article III:4, in order to giveeffect to the references in Article III:2 to “like products” as well as to thebroader category of “directly competitive or substitutable products.”

To be sure, the Appellate Body uses the full capabilities of the provisionsof the Vienna Convention relating to interpretation. But, as suggestedabove, its use of context, object, and purpose is often highly circumscribed.The expressio unius canon of interpretation is a passive means of interpreta-tion, and can easily be reversed by reference to a more teleological approachto interpretation, as would be required by a reference to context, object, andpurpose.113

In its U.S.—Clove Cigarettes decision, the Appellate Body dealt with asomewhat similar circumstance. Textually, the TBT Agreement does notinclude an exception like GATT Article XX. But in interpreting the na-tional treatment obligation in Article 2.1 of the TBT Agreement, the Ap-

113. For a trenchant criticism of this limited approach to interpretation in a similar context, seeDouglas A. Irwin & Joseph Weiler, Measures Affecting the Cross-Border Supply of Gambling and BettingServices (DS 285), 7 World Trade Rev. 71, 94 (2008), “[T]his peculiar brand of hermeneutics devel-oped by the Appellate Body and demonstrated so clearly in this case . . . repeatedly plays lip service tothe VCLT while ignoring its holistic and integrative approach to text, context, and purpose.” It isinteresting that in the Gambling case, the Appellate Body utilized a teleological argument to avoidapplying the plain language of the text of Article XVI of GATS, holding that the proscription of certainmeasures “in the form of numerical quotas” could include measures in the form of qualitative require-ments. Id. at 93.



pellate Body utilized the context of GATT Article XX, in conjunction withthe TBT Agreement preamble and other elements, to interpret the obliga-tion in Article 2.1 in a less restrictive way than the similar text contained inArticle III of GATT.114 While the Appellate Body did not go so far as tofind Article XX applicable to member states’ TBT Agreement obligations,it did use the exception contained in GATT, combined with preambularlanguage calling for a balance between trade and environmental goals, asinterpretative context in order to depart from a purely textualist interpreta-tion of TBT Article 2.1. Here, the Appellate Body ignored the effet utilecanon of interpretation, in order to focus on context, object, and purpose.

It is perhaps understandable that the Appellate Body would expect thatadherence to textualism insulates it from criticism, and deflects responsibil-ity to the member states. Thus, perhaps a stricter textualism was the rightstrategy for the early Appellate Body. As Robert Hudec mentioned in thecontext of the Appellate Body’s approach to WTO legal rules restrictingdomestic regulation “recognizing (its) very exposed position, the AppellateBody may well have concluded that the safest refuge from political criticismwas to stay as close as possible to the shelter of the legal texts accepted bygovernments.”115 But is it still normatively attractive for a judge to leavethe text as it stands, declining to amplify, limit, or correct the text in amanner suggested by the context, object, and purpose?

Economic analysis of the law of contracts suggests that, in the realm ofcontract, judicial amplification, limitation, or correction is in the interests ofthe contracting parties.116 A purely textual method of interpretation is infer-ior to some method of non-literal interpretation, unless the parties were ableto address the relevant issue specifically.117

Thus, if a treaty could address every contingency specifically, purely lit-eral interpretation would be an efficient rule. However, treaties, like othercontractual structures, are necessarily incomplete.118 Parties may fail to pro-vide for certain events, and, on the “amplification” side, the GATT/WTOdoctrine of non-violation nullification or impairment seems designed tolimit the ability of obligors to nullify or impair their obligations withoutcompensating the beneficiaries of their obligations. However, non-violationnullification or impairment has only been applied successfully in a limitedrange of cases, and there is no converse doctrine, like a common law doctrineof equity, limiting or otherwise correcting the text.

114. Appellate Body Report, U.S.—Clove Cigarettes, ¶ 181, referring to ¶ 101.115. Robert Hudec, GATT/WTO Constraints on National Regulation: Requiem for an ‘Aim and Effects’

Test, 32 Int’l L. 619, 633 (1998).116. See Steven Shavell, On the Writing and the Interpretation of Contracts, 22 J. L. Econ. & Org. 289,

289 (2005).117. Id.118. Oliver Williamson, The Economic Institutions of Capitalism: Firms, Markets, Rela-

tional Contracting 20 (1985).



Perfect, and detailed, contracting over all future contingencies is infi-nitely costly, and so parties can be expected to use general terms to addressissues. Given these general terms, interpretation is not just about determin-ing what the parties meant, but about applying the heuristic established bythe parties. Thus, again on the amplification side, it seems clear that muchof the WTO’s law relating to discrimination and domestic regulation iswritten in general terms with the expectation not that the Appellate Bodywill simply apply linguistic techniques to decide the case, but with theexpectation that the Appellate Body will actually engage in a type of maxi-mizing judgment. The Appellate Body’s jurisprudence of national treatmenthas sought to avoid judgment, but, as Robert Hudec suggested, some degreeof judgment is unavoidable in cases of de facto regulatory discrimination. Itis also necessary in determinations of necessity and in determinations of sci-entific basis.

Richard Posner suggests that courts charged with “disambiguating” acontract have four choices:119

1. Seek to determine the intent of the parties—this involveshigh judicial costs. Obviously also, the intent of the parties maynot be homogeneous: very often disputes arise from honest differ-ences in understanding at the time the treaty was drafted.

2. Resolve the ambiguity in the way that the court deter-mines is most efficient. Here, the WTO dispute settlement sys-tem has several limitations in determining efficiency, even moreso than do domestic courts, insofar as the judges would be re-quired to identify and commensurate among the preferences ofdiverse people from very different cultural and economic circum-stances. On the other hand, there are some circumstances in whichexpert economic advice would assist the WTO judges in seekingefficiency in some types of cases.

3. Use a tiebreaker. A rule such as expressio unius, unless theparties are aware that the court will use it, can be seen as atiebreaker. It is a non-substantive way of resolving disputes. If theparties are aware of its use, on the other hand, it confers an advan-tage on those diligent enough to anticipate its effects.

4. Use a combination of one and three, by assuming that thetiebreaker reflects the parties’ intent. This is a literalist method ofinterpretation.

Posner suggests that use of a tiebreaker is the cheapest method in terms ofjudicial costs, but yields the fewest benefits in most cases because its arbi-trariness will cause parties to over-invest in specificity ex ante. The first two

119. Richard Posner, The Law and Economics of Contract Interpretation, 83 Tex. L. Rev. 1581, 1589(2005).



approaches minimize negotiating and drafting costs. In the WTO context,negotiating and drafting are expensive in terms of both political capital andtime. Indeed, by abstaining from substantive interpretation, and using liter-alist tiebreakers, the Appellate Body makes it more difficult for WTO mem-ber states to reach agreements.

I have suggested above that a move toward greater judicial judgment inseeking efficiency would be desirable. I suggested replacing the AppellateBody’s reluctance to judge with specific instructions to judge by establish-ing an exemption from restrictions under trade law for all environmentalprotection measures that are not disproportionate i.e., that are not exces-sively costly in relation to the benefits they offer. This would not be a purecost-benefit analysis—it would not directly seek efficiency—but it wouldapproximate efficiency as fully as possible under the constraints of interna-tional adjudication. It would be an improvement over the selective textual-ism used by the Appellate Body to avoid exercising the judgment that hasbeen delegated to it.

VII. Conclusion

The WTO Agreement may be understood as a state-contingent contractcontaining obligations and exceptions, each dependent on findings of partic-ular facts. The obligations contained in Article III of GATT, and the excep-tions contained in Article XX of GATT, may be understood as designed toprovide a mechanism for applying and relaxing WTO obligations wherespecified reasons apply and specified conditions are met. This serves to pre-serve WTO obligations, while ensuring that compliance with these obliga-tions is not excessively costly in terms of other values, such as conservationof exhaustible natural resources.

During the GATT period, and over the first twenty years of the WTOperiod, WTO jurisprudence addressing the relationship between trade liber-alization commitments and environmental protection has evolved based on atext-focused set of interpretations of various provisions of WTO law. Thatthere has been no “environmental disaster” in Geneva is a testament to theinclusion in the WTO treaty of appropriately permissive rules and excep-tions that leave sufficient room for environmental protection, as well as tothe sensibilities of WTO judges. But there is still significant uncertainty,and the jurisprudence contains significant inconsistencies and poses signifi-cant risks. There are two ways to reduce the uncertainty, inconsistency, andrisk.

First, the Appellate Body could re-emphasize the object and purpose ofthe WTO treaty, as expressed in the first recital of the Marrakesh Agree-ment, and take a broader view of the context of the provisions it interprets,in order to develop interpretations that clearly and consistently permit even-handed and proportionate measures to protect the environment. Measures



that have a legitimate regulatory motivation that justifies the regulatorydistinctions would be understood as even-handed, and measures that are notexcessively burdensome on exporting state interests in comparison to theenvironmental benefits achieved would be understood as proportionate. Thisis the direction that the jurisprudence has tended toward, but there havebeen twists and turns along the way.

There is room for this type of interpretation without doing any violenceto the text of the treaty, but it would do some violence to the jurispruden-tial superstructure that the Appellate Body has developed over the pasttwenty years. The Appellate Body would need to emphasize object and pur-pose over effet utile in its interpretative method. Now, after twenty years ofexperience, it is time for the Appellate Body to rectify and consolidate itsjurisprudence. The Appellate Body is already quite sensitive to its role inthis context. In the China—Raw Materials dispute, it held that “we under-stand the WTO Agreement, as a whole, to reflect the balance struck byWTO Members between trade and non-trade-related concerns.”120

Alternatively, and for greater clarity and reliability, WTO member statesmay, through a simple treaty amendment, achieve the same purpose, bystating that, notwithstanding any other provision in the WTO treaty, even-handed and proportionate measures to protect the environment shall be per-mitted. Indeed, this amendment could be extended beyond the environmentto ensure that an appropriate right to regulate is available to all memberstates in all legitimate areas of regulation.

120. Appellate Body Report, China—Raw Materials, ¶ 306.

wto trade and environment jurisprudence: avoiding ...wto law has as its focus the promotion of a...

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